Healthcare Communications and the Next Ten Years – Part 3 – PDUFA and Funding for the FDA

September 11, 2006

This is the third in a series that begins each week and on-going for a number of weeks, exploring specific topics related to changing health policies and their impact on healthcare communications.

Let’s look at the money up close, shall we? How does the FDA do it’s job? Who pays for it? What does that mean? What’s the risk? What’s the future?

PDUFA is a funny acronym for the Prescription Drug User Fee Act. To take a real shortcut, PDUFA allows the FDA to collect fees from the pharmaceutical industry and use those fees to fund extra staff so that the review of new drug applications can be done more quickly. Think of it as similar to the fee you pay when you go into a national park. Your fee subsidizes the costs of the park upkeep along with federal money provided by Congress. Every five years, the fees must be negotiated, which is happening now, and in the next ten years, will happen twice more.

When PDUFA fees began, when Dr. David Kessler was the Commissioner of the FDA, the fees comprised only about 7% of the agency’s budget. There have been two sets of negotiations since then that have, according to the Wall Street Journal, brought the level up to 53% of the budget. Currently, negotiations have been underway for the next cycle of PDUFA fees, and the percent of the budget represented by PDUFA is likely to expand over the next five year period.

This leads many, particularly Congressional critics and consumer protection organizations, to speculate whether an agency that has a charge to safeguard the public health can receive funding from the industry it is meant to regulate and still remain impartial.

Yet, it is many of those same critics are seeking to impose mandates on the FDA to do more, much more, than in the past. Those mandates are going to cost money. Where is that money to come from?

Consider several pieces of legislation now before Congress that would seek to reform the FDA. Most are oriented towards safety. There are proposals that would give the agency authority to monitor and enforce post-marketing commitments. Right now, companies can say at their FDA Advisory Committee meetings that they are going to conduct such studies, but the FDA has no authority to enforce it. (Here at Eye on FDA, there is a link to review companies and their track record on post marketing commitments, if you are so inclined.)

What PDUFA critics may not realize is that we have, in essence, passed a milestone on the debate. We are well past the point of turning back the PDUFA clock. We either have to accept the premise that this funding leaves the agency impartial or move to have the federal government subsidize truly expanded activities for the agency, which may be multiplied by a new Congress. Given the shift in political winds, that possibility is quite potent.

Another possibility is that the way the funding rate structure of PDUFA occurs, with direct negotiation between the agency and the industry, is changed to reflect that of other federal agencies, meaning a new process is put into place that removes the give and take between the agency and the industry. Or, alternatively, it is quite possible that there be a mandate imposed which makes the negotiations a more transparent and public process, rather than the closed door sessions that make up the system now. That would be in better keeping with the FDA culture of transparency.

The next ten years are going to see profound change in the agency. The current environment colored by the post-Vioxx mentality, is likely to produce many more mandates. Add to that the vigorous mandates spawned by issues related to food security in the heightened security of the post 9/11 environment, and the shift into biotechnology that is occurring in drug development, and you have quite an expensive mandate.

The money to pay for them will have to come from somewhere. I think it will continue to be PDUFA, though the system itself may have to change. PDUFA fees, I think, are here to stay, and to climb.

About This Blog

Eye on FDA is published by Mark Senak of FleishmanHillard's Washington, D.C. office. The thoughts and ideas in this blog and postings are strictly my own and are not screened by my employer. Everything posted on this blog is my personal opinion and does not necessarily represent the views of FleishmanHillard or its clients.